Paiva Weed asks to restore tax exemption on tours

Legislation has been submitted in the Senate to restore the sales tax exemption on scenic tour and transportation services. Sponsored by President of the Senate Teresa Paiva Weed and Sens. Louis P. Di- Palma, Christopher Scott Ottiano, David E. Bates and Walter S. Felag Jr., the bipartisan legislation has been referred to the Senate Committee on Finance.

The legislation was promised by the Newport delegation – Paiva Weed and DiPalma – in August following meetings during which members of the tourism industry expressed their concerns that the new tax placed them at a competitive disadvantage.

The senators noted that the $1.1 million provision impacts one of the state’s most important industries: travel and tourism. The 2011 budget extended the state’s 7 percent sales tax to package tours and scenic and sightseeing transportation services that take place in whole or in part in Rhode Island, effective as of Oct. 1, 2011. (Transportation that does not involve sightseeing is not subject to the tax.)

“This revenue helped to close the budget gap and was one of many very difficult decisions,” said Paiva Weed. “But in the months since its enactment we have heard from many in the tourism industry about the unintended consequences of this provision. The legislation we have introduced will remove a potential impediment to our vital tourism industry. I look forward to working with the tourism industry as this legislation is considered.”

According to Paiva Weed, travel and tourism represent 5 percent of Rhode Island’s gross domestic product and 9.2 percent of total employment. She added that a Global Insight tourism study created more than 42,000 jobs directly and indirectly by travel and tourism.

“We should be doing everything we can to support this vital industry,” she said. “Instituting a tax detrimental to tourism makes no sense, and I am working to ensure that the tax is reversed.”

DiPalma said that the beauty and charm of Newport and the whole state is unparalleled, so it is little wonder that tourism is one of our major industries. “Investment in this industry pays dividends as dol- lars from out of state flow into our world-class destinations and support local and state priorities while alleviating pressure on local and state taxpayers,” he said. “The tax on tour packages presents a disadvantage to local tour companies when we should be giving them every advantage we can.”

If tourism didn’t exist in Rhode Island, each household would pay $1,349 more in taxes to maintain the current level of state and local tax receipts, according to the Global Insight study. Each visitor creates about $134 in tax receipts, $78 of which goes to state and local authorities. It takes only 185 visitors to pay for one Rhode Island public school student for a year.

Evan Smith, president of the Newport & Bristol County Convention and Visitors Bureau, said when the action was announced in August that he appreciates the response from Newport’s Senate delegation. “This tax puts Rhode Island at a marketing disadvantage in the highly competitive travel industry,” Smith said. “Our elected officials have a challenging job. I appreciate the responsiveness of Sen. President Paiva Weed and Sen. DiPalma and look forward to working together with them in a team effort to address our concerns.”

Dale J. Venturini, president and CEO of the Rhode Island Hospitality Association, said that the new sales and use tax on package tours and scenic and sightseeing transportation threatens to drive visitors, tour providers and cruise ship operators away from Rhode Island at the exact time steps should be taken to attract these groups to our state.

“The Rhode Island Hospitality Association is pleased that Sen. President Teresa Paiva Weed and others in the General Assembly have listened to the concerns of their constituents and RIHA by calling for the repeal of this new tax,” said Venturini.

Massachusetts levies a similar tax, applicable to packaged tours in Boston, at a rate of 5 percent. Vermont also levies a similar tax, at a rate of 6 percent. Connecticut, Maine and New Hampshire do not levy a sales tax on packaged tours.